The Danger of Under-Management

22 March 2007 at 9:05 am 6 comments

| Peter Klein |

As we’ve noted before, the hype about flatter hierarchies, modular organizational architectures, worker-managed teams, and the like tends to obscure the costs of decentralization or, conversely, the benefits of hierarchy. Sure, we can worry along with Bob Sutton about abusive bosses. But what about bosses who exercise too little authority?

WebWorkerDaily is running an open thread on under-management. Notes Anne Zelenka:

Books like The Starfish and The Spider: The Unstoppable Power of Leaderless Organizations promote the idea that decentralized loosely-managed organizations can be more successful than hierarchical traditionally managed organizations. Starfish organizations, so the claim goes, work mainly via flat and collaborative peer networks, not by the practice of top-down leadership or management. This might make you think that management isn’t necessary in the new world of work and business enabled by the web. Yet even so-called starfish organizations like Wikipedia and Craigslist rely on some sort of governance structure and effective leadership to succeed.

Entry filed under: - Klein -, Management Theory, Theory of the Firm. Tags: .

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6 Comments Add your own

  • 1. spostrel  |  22 March 2007 at 8:04 pm

    Talk about a contingent question! Everything from the psychlogy and culture of the employees to the nature of the technology employed to the characteristics of demand would impinge on optimal authority levels.

    A general point: If everyone on a team were cogniitively unbiased and motivated to maximize the objective function of the team, then all the coordinating activities necessary could be accomplished without trammeling anyone’s discretion. (By restricting discretion, I mean preventing or deterring an agent from taking a feasible action that he prefers/believes is best for the team.) As Madison put it, “If men were angels, no government would be necessary.”

  • 2. Managing for Creativity « The Creativity Exchange  |  23 March 2007 at 1:39 pm

    [...] Peter’s post got me thinking about what I’ve learned after many years of studying large companies like Toyota, high-tech Silicon Valley startups, research environments, and creative people. [...]

  • 3. Kevin Carson  |  24 March 2007 at 1:35 am

    I think you’re right, if “leaderless organization” just means a vacuum of leadership at the top, without any corresponding authority of those at the bottom to manage themselves for real.

    But I believe agency and information problems are cut way down if the leadership’s authority comes from those doing the work, and the people making the decisions internalize all the costs and benefits of the decisions they make. Making the workforce the residual claimant is the best way to eliminate conflicts of interest and replace administrative with strong market incentives.

  • 4. Gary Furash  |  26 March 2007 at 9:05 am

    Peter, can you blog about this a bit more explicitly. The whole “empower a bunch of people and you’ll magically get higher productivity than you would in a firm” seems dubious to me. I think hierarchies and leaders would naturally emerge anyway (they do, even on open source projects). The idea that every firm should be some kind of remote version of a Kibbutz strikes me as odd.

  • 5. Peter Klein  |  26 March 2007 at 10:59 am

    Gary, thanks for asking. I certainly think the benefits of “empowerment” have been oversold. Nicolai and I are working on a paper that walks through these issues more systematically. We will try to blog about it in the coming weeks.

  • [...] Cities »by Richard FloridaFri Mar 23rd 2007 at 11:59am EDTManaging for Creativity Over at Organizations and Markets, Peter Klein has something very interesting to say about  “under-management.”   ” Sure, we [...]

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